China top buyer of Indian steel during lockdown

In April and May when India was under curbs to contain the Covid-19 pandemic, China emerged as an important export destination for steel companies, accounting for about 48 per cent of total exports.

According to joint plant committee data, finished steel exports to China between April 1 and May 31 stood at 440,000 tonnes while semis was at 1 million tonnes; total finished steel exports during the same time was at 1.7 million tonnes and semis at 1.3 million tonnes. While in finished steel exports, volumes to Vietnam were higher, China accounted for the lion’s share of semis.

Jayanta Roy, ICRA senior vice-president, said in the first two months of the current financial year Indian exports of finished steel grew by almost 76 per cent on a YOY basis. “China alone accounted for close to 60 per cent of the increase, importing 440,000 tonnes of steel compared to negligible levels in the previous year. Overall steel exports grew at a faster pace at 129 per cent YOY in April and May because of threefold increase in the export of semis,” Roy said.

Jayant Acharya, director-commercial and marketing, JSW Steel, said exports of products to China had been more in semis and hot rolled coils. “Exports of semis would be both from primary producers and secondary producers. Our export proportion to China is not that high,” he said.

T V Narendran, managing director and chief executive officer, Tata Steel, explained that companies were exporting to China because of strong demand. “China is finding it better to import steel than import iron ore and coal at today’s prices,” he said.

China is one of the biggest iron ore importing countries. Iron ore prices, which were $83 a tonne in the end of March, are currently at $103 a tonne. Prices of coking coal, the other major input, however, dropped to $114 a tonne from $114 a tonne during the same period.

Sushim Banerjee, director general, Institute for Steel

Development and Growth, said domestic steel prices in China had increased significantly. The difference with imports, for hot rolled coil, was about $70 a tonne. Though there was a demand, led by government spending on infrastructure, industry executives believe this was unlikely to last and Indian companies should look for alternative markets.

Roy said that sustainability of such growth rate in exports was doubtful as China ramps up its own production. A weak demand outlook in other parts of the world would also pose challenges to Indian steel mills, he added.

China produced 92.3 million tonnes of crude steel in May 2020, an increase of 4.2 per cent compared to May 2019, even as most countries reported a decline.